Silver linings in Boston's clouded real estate market
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Maura Losch/Axios
The buzzwords surrounding Boston's real estate market in 2025: measured optimism — despite persistent challenges to both the residential and commercial markets.
Why it matters: Massachusetts still faces two major hurdles in the high price of housing and the underutilization of commercial office space.
The cost of living here and a spiraling commercial space sector are critical factors for the region's economic health.
By the numbers: 2024 was rough for Boston-area affordability, and the trends don't bode well for this year.
- Typical home prices surged past $900,000, marking nearly 6% growth year-over-year.
- Mortgage rates are up a point from 2024's low, hovering at 7.1%.
- Nearly a quarter of office space remained empty throughout 2024.
Yes, but: There are some promising signs in the residential market as experts expect housing inventory to continue to creep up.
- Winter home buyers may find less competition and potentially softer prices than those looking to move in the spring or summer.
Between the lines: Policymakers, developers and commercial building owners are holding their breath for signs that the office market will stabilize in 2025.
- Major employers including Amazon and Salesforce are revamping office policies, potentially leading a trend to get commuters back downtown.
- The city's program to turn some empty commercial buildings into housing has taken root and could have the dual effect of increasing residential inventory and lessening open office space.
What's next: How the Federal Reserve handles interest rates in 2025 will play a big role in how Boston adapts to new real estate realities.
- If the Fed goes through with plans for only modest rate cuts of about half a point, homeowners looking to sell might be reluctant to abandon locked-in low mortgage rates.
- Real estate agents suggest rates need to drop to 5.5% or lower to spur more market activity.
What we're watching: A few key construction projects could serve as barometers for Boston's residential and commercial health in 2025:
- The 51-story South Station tower's new Ritz-Carlton luxury condos will test buyers' willingness to spend big on housing while rates are high.
- The Harvard Enterprise Research Campus in Allston will open with a hotel, hundreds of residences and a lab-and-office complex to come next year. Its university affiliation could help it compete with other new science facilities.
- 10 World Trade in the Seaport District is still seeking an anchor tenant for its 17 stories of lab and office space.